Key Points and Summary – Almost four years into Russia’s full-scale invasion, Ukraine’s economy is under severe strain.
-Before the war, the country showed stable growth and record exports.
-The invasion triggered the biggest recession in its history, with GDP plummeting and poverty spiking as millions fled. Today, the economy shows resilience, but growth is slow, hampered by high unemployment, elevated inflation, and Russian attacks.
-While essential services remain operational thanks to Western support, the country’s long-term economic outlook is poor and remains entirely dependent on the war’s duration and the continued flow of international aid.
Here’s How Ukraine’s Economy Is Faring
While much attention is given to Russia’s economic struggles, Ukraine’s economy is enduring a severe strain of its own.
Almost four years into the conflict, the country’s growth, labor market, and inflation remain disrupted – and Kyiv is fighting to keep growth alive amid collapsing exports and rising unemployment.
Pre-War Markers
Before Russia’s full-scale invasion in February 2022, Ukraine’s economy was showing signs of stability and moderate growth. In 2021, its economy grew by 3.4% as it began to recover from the COVID-19 pandemic-driven contraction in 2020. That growth was largely powered by growing exports, which rose by 38% year-on-year, reaching a record $68.2 billion – the highest since 2012. Agricultural products, metals, and ore shipments to the European Union and Asia were key drivers behind that growth in demand and showed promise for the future.
Domestic consumption rose, too. World Bank data shows household consumption expenditure grew by 6.9% in real terms in 2021, hinting at growing consumer confidence following the first year of the pandemic. At the same time, there were challenges; core inflation increased to 7.9% year-on-year, up from 4.5% year-on-year in 2020 – well above the National Bank of Ukraine’s 5% target. Unemployment was high, too, at 9.8%.
Those problems, however, were nothing like the economic pain the country quickly endured the moment Russian President Vladimir Putin ordered a “special military operation” over the border.
Post-Invasion
In the first year of Russia’s invasion, the Ukrainian economy was hit badly, with GDP sinking by as much as 35% over the year before. The country was quickly plunged into the biggest recession in its history, causing widespread food insecurity, poverty, and uncertainty for millions of workers – many of whom simply decided to leave. By mid-March, 2023, more than eight million Ukrainians had fled to neighboring European countries.
During the same time frame, the percentage of Ukrainian citizens living in poverty rose from 5.5% to 24.2%.
Ukraine has been generally resilient throughout the conflict – but growing an economy is generally impossible under wartime conditions. The IMF projects 2% real GDP growth for Ukraine in 2025, while the country’s central bank has adjusted its forecast down from 3.1% to 2.1%, citing intensifying Russian attacks. Moody’s forecasts, meanwhile, project around 2.5% growth and maintain that Ukraine’s GDP remains below pre-war levels.
Unemployment is high, reaching 11.2% in July this year, and inflation reached 14.6% in March 2025 – and is expected to remain elevated for some time.
The Ukrainian central bank expects inflation to ease to 9.7% by year-end.
And while Ukraine has managed to keep essential social and health services operational in large parts of the country, with children still attending school and many businesses remaining operational, the country’s economic outlook is still poor. According to the World Bank, economic growth is expected to slow to just 2% this year.
While Washington may be optimistic about Moscow agreeing to a peace deal soon, Ukraine faces uncertainty either way; the country’s economic outlook largely depends on how long the war lasts, the territory that may be lost, and the level of economic and financial support provided by allies to rebuild the country – along with a multitude of other factors.
About the Author:
Jack Buckby is a British author, counter-extremism researcher, and journalist based in New York. Reporting on the U.K., Europe, and the U.S., he works to analyze and understand left-wing and right-wing radicalization, and reports on Western governments’ approaches to the pressing issues of today. His books and research papers explore these themes and propose pragmatic solutions to our increasingly polarized society. His latest book is The Truth Teller: RFK Jr. and the Case for a Post-Partisan Presidency.
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